The SBO’s Guide to the Liabilities of Company Vehicles

Many small businesses own a company car or two for the purpose of handling deliveries and house calls. A fleet can be an essential tool for running your …

Many small businesses own a company car or two for the purpose of handling deliveries and house calls. A fleet can be an essential tool for running your business efficiently, but the potential legal pitfalls can be substantial.

You need to be aware of several critical issues when you have an employee drive a company car. Use the guide below to sort out the legal points and possible complications associated with operating a company vehicle.

Employer Liability Cases

Employers can be held liable in two ways. The first is employer negligence, which occurs when the employer is held negligent for hiring a particular employee. An employer has a duty to hire people who can be trusted to be safe drivers if the boss knows the worker will be driving a company vehicle.

Your responsibilities involve several details, including checking the driving record, making sure the employee’s license has not expired, requiring a commercial driver’s license for commercial vehicles, and performing a drug test, among other things. When the employer has performed each of these checks properly, a case against the employer will not hold up in court.

The employer can also be hit with a negligent claim if careless supervision appears to have been a factor as well. This claim will have merit if an employer does not have proper safety policies and equipment in place to ensure that employees will have a safe driving experience. For example, an employer that doesn’t take out a car insurance policy for the company car could be hit with a liability charge.

Claim up to $26,000 per W2 Employee

  • Billions of dollars in funding available
  • Funds are available to U.S. Businesses NOW
  • This is not a loan. These tax credits do not need to be repaid
The ERC Program is currently open, but has been amended in the past. We recommend you claim yours before anything changes.

The second form of liability is known as vicarious liability. For a simplified definition, vicarious liability holds that the employer’s actions are the same as the employee’s actions. In other words, if the employer tells an employee to do something, the employer is liable for that action, though the employee actually performed the deed.

It’s vital for employers to have suitable protection in place for both forms of liability before they let workers drive a company vehicle. This is the best way to ensure that a liability claim doesn’t stick to you.

Handling Car Accidents

Usually, the company car is used for deliveries, transportation to and from job sites, and the pursuit other work-related duties. When a collision occurs on the job, the lines can get a little fuzzy as to who may be liable.

Essentially, when an employee is at fault for an accident, liability can possibly extend to both the employee and the employer, particularly if a third party was hurt. The employer’s liability insurance will usually protect the employee so he or she doesn’t have to pay damages or medical bills.

However, if the employee commits a crime while driving a company vehicle (such as running a stoplight or not wearing a seatbelt), the employer’s liability insurance may not cover the crash.

Worker’s Compensation vs. Liability Insurance 

Many SBOs readily confuse liability insurance and worker’s compensation, but they’re not the same thing. The most basic difference is that liability insurance pays for injuries and damages sustained by a third party, while worker’s compensation covers the employee.

The latter will cover lost wages, out-of-pocket expenses, and employee medical bills. Some injuries may be serious enough that the employee qualifies for a settlement award, and worker’s compensation might help to pay for that as well.

Dealing with the legalities of company vehicles is no picnic. It involves a thorough understanding of all the liabilities that could possibly be pinned on you as the employer.

This doesn’t mean you should avoid owning a company car, but you have to understand what can ensue if you don’t have proper insurance coverage. The best form of protection is to keep a solid lawyer on retainer who can explain these principles and seal up any legal cracks around your use of a company vehicle.


Does Your Small Business Qualify?

Claim Up to $26K Per Employee

Don't Wait. Program Expires Soon.

Click Here

Share This:

In this article